Almost completely shrouded in the drumbeat of negativity that passes as business reporting these days has been the bursting growth in U.S. service exports – increasingly from U.S. startups and small businesses.

Contrary to the image of imports and exports being only “stuff” flowing in and out of places like the Port of Long Beach, last week's Census Bureau noted that services accounted for 30%, or $57.4 billion of total U.S. exports in October. And unlike our huge “hard goods” trade deficit, in the value of U.S. service exports was 51% greater than that of imports.

Business, professional, and technical services were the fifth largest U.S. export category in 2008, and half of the top 10 major export categories were services. And with U.S. service companies representing close to 15% of global commercial service exports, the United States is hands-down the world’s dominant service exporter.

Protectionist types of course interpret this to mean that “our wages will get pushed down to “their” levels – or more viscerally, “if this keeps up we’ll all soon be making $2 dollars per hour.”

Well, let’s leave for now the huge economic fallacy of this thinking and concentrate on the fact that the narrowing of the relative wealth differential between the U.S. and the rest of the world has allowed for phenomena like a Ukranian manufacturing company hiring U.S. advisors (i.e. Growthink) to help them define strategic growth opportunities in Poland.

Why? Because on a dollar-for-dollar (or better yet, zioty-to-zioty) basis, it was a better value for them to import services like these from the U.S. The world is changing, isn’t it?

2. U.S. Services are Increasingly Exportable. The drumbeat always goes on how “we here in the U.S. don’t “make anything.” Well, beyond the fact, that I note in my “Made In China” post that very few Americans dream that their children will grow-up and work in a factory, we here in America “make” the most important stuff that has ever existed we do it better than any society has ever done so.

That stuff? Ideas and Innovations. Strategies.

Or more prosaically, Brands. Websites. Entertainments in all their wondrous forms – Movies, Video Games, Social Networks.

Even our current favorite whipping boy industry – financial services – continues to bring us world-bettering innovations like venture philanthropy (i.e. applying market principles to solve the world’s most pressing humanitarian challenges), super angel funds (overcoming the “outlier” or “Black Swan” conundrum of startup investing) and of course crowdfunding (democratizing fund-raising and investing in ways never before even dreamed possible.)

3. Global Best Practices. Perhaps my favorite, namely that business best practices worldwide are visible and replicable to and for all. And the corollary, the really screwed-up and ineffective ways of doing things are also blatantly transparent.

From lists like the “most business friendly” countries to California now having a portal where parents can see teacher’s ratings to the U.S. Senate studying Chinese technocrats to the simple reality that the Internet and mobile phones make it crystal-clear to all who is winning and losing in the world (see North Korea, Iran, et al.), the modern world has become a rickly competitive market in all its best senses.

The cream rises, and the inefficient, the bureaucratic, the regulatory dead-enders get left on the dustbin of history.

And guess who, when it comes down to doing business right, is the richest cream, the sweetest soup?

It is, of course, American startups and smaller and emerging companies.

And as they, like the U.S. economy as a whole, become almost exclusively services-focused, they will both lead and profit from their exploding opportunities worldwide.

This blog post was written by Mary Juetten, founder of Traklight.com, a site that provides inventors, creators, and small businesses with integrated software tools to identify and protect intellectual property.

Startups and small businesses are torn when it comes to protecting their ideas. There is a challenging balance between keeping the critical pieces secret and promoting products and services during fundraising – whether with angel investors, venture capitalists (VCs), or crowdfunding platforms.

The NDA question comes up more than you would think because scrappy entrepreneurs are always looking for collaborators, co-founders, and capital while jealously guarding their ideas.At least once a week, I hear one side of this debate or field a question on the topic.

What is a NDA?

Let me first say I am not an attorney (see the disclaimer at the bottom of this article). That being said, a Non-Disclosure Agreement (NDA) is a legal document used to protect ideas, know-how, and other secret sauce under a variety of circumstances.

One standard use of a NDA is protecting one company from another during discussions and negotiations. That means, if I approach Company A to code my software application, I want Company A and all their employees and contractors to keep all discussions about my project confidential.In the same situation, a mutual NDA means that everything Company A discloses about how they will work with me needs to be kept secret by me and my team. If I have a mutual NDA with Company A, I cannot go to software Company B and spill secrets learned from Company A.

As I said, I am not an attorney however I did go to law school (and yes, I graduated but chose to start my company rather than take the bar).The answer to almost every question in law school was, “It depends.” And that is the case here.Requesting and/or insisting upon a NDA depends on the situation. Are you hiring an employee? An independent contractor? Perhaps you are hiring a company for custom work, or are talking to potential co-founders, angel investors, or venture capitalists. Or maybe you are sharing information to collaborate or simply chatting in the grocery line.

NDA for Employees and Contractors

It’s my humble opinion that employees and contractors should be under NDA when you are revealing your know-how during initial discussions. It is purely good business sense to ask for that level of protection. The “I’ll show you mine, if you show me yours” strategy can backfire without a NDA, not to mention these handshake deals are not professional and can lead to messiness (a distraction when trying to start or grow a business).

Please seek professional advice to ensure that your contracts of employment, consulting, operating agreement, articles of incorporation, etc. have the appropriate non-disclosure provisions for your state.

NDAs are questionable for angels; NO for VCs

It is high unlikely the professional investor wishes to steal your idea. The main reason angel investors are reluctant to and venture capitalists (VCs) often refuse to execute a NDA is because they may then be limited in the future from funding similar companies.Another reason is that your company and products may conflict with their existing ventures.

One path forward is to only reveal enough information to interest potential investors while keeping mission critical secrets secret, especially in the first meeting.

No NDA for public pitch or demo competition

Trade secrets are no longer secret if revealed to the public. There is no confidentiality in a public setting, so leave your secrets at home. Disclosure of such secrets may impact the ability to patent here in the US and globally, so be careful in any public pitch, tradeshow, or presentation.

All entrepreneurs understand that the tough part is execution, not idea generation. And to be technical, ideas themselves are not intellectual property. So you need to think of the context of your discussion and what you are trying to protect.

Know your audience. If you have the next great software idea and you are not technical enough to code yourself it is likely a good idea to ask potential co-founders or software companies to sign a NDA before you reveal the details of your idea.

Does that mean you carry the NDA in your purse (or briefcase)? You may but it is mostly applicable for the meeting after your initial encounter. When revealing your secret sauce or business process in public, a NDA is critical.

In conclusion, if someone does not wish to sign a NDA, think of the context, timing, and the person before you walk away. That done, if you have that niggling, uncomfortable gut feeling about why the person will not sign the NDA, head in the other direction.

Visit Traklight and use “ID your IP” with Traklight’s compliments until February 28, 2014. Remember, you cannot protect something if you do not know you have it!Free “ID your IP” Code GROWT13 ($59 value).

Disclaimer: This article is intended to be general information and nothing in this article constitutes legal advice. Please consult with an attorney before making any intellectual property or other legal decisions.

As has always been the case, most commercial and neighborhood banks only lend against quickly “liquidatable” assets or at a small multiple of historical cash flow.

Given that most startups and small businesses have neither of these, for them attaining traditional bank financing has such a low probability of success that it is rarely even worth the time to pursue.

So, where should the creative and committed small business owner go for funding when the banks say no?

Here are three places to look:

1. Crowdfunding. Donation - based crowdfunding platforms like Kickstarter allow entrepreneurs to raise capital from one's social and professional networks.

While investor appetite will take time to develop, as it does the available pool of investable angel and venture capital (currently approximately $50 billion annually) will expand dramatically, and in turn closing the gap between the tens of thousands of companies seeking capital and the investors interested in providing it.

2. Family and Friends. Since time immemorial by far the most popular funding source for new and small businesses is to ask those that know you best to stake your entrepreneurial journey.

For sure it is emotionally loaded, as so many of us don't want to mix our personal and professional lives, but it does provide a great “gut check” as to how serious, committed, and “sold” you really are on your business.

Why?

Well, it is one thing to lose the money of strangers, quite another to do so of Uncle Jed who you'll be seeing each holiday season.

A way to “reverse the frame” in these family and friends dialogues is to recognize that while yes, a relative or friend is doing you a big favor by investing in your business, you in turn are returning the favor and more by providing an opportunity for an outsized investment return along with the unique excitement of being a stakeholder in a small business.

3. Sell Services. Especially for technology and consumer product companies, the long pathway of research, product development, and establishing distribution mean that often years can go by in the dreaded “pre-revenue” stage.

So as opposed to relying solely on investment capital to “deficit finance” this gestation period, how about generating some cash through selling consulting services in the interim?

As examples, a company building a new and proprietary mobile application could in parallel build apps for others, a new restaurant could do catering, or a consumer product business could sell research services regarding their market niche.

And, if structured right, in addition to paying the bills, consulting projects like these can also be utilized to iterate one’s product development forward.

Use these three strategies - and do so as with all matters related to starting and growing a business with creativity, determination, and persistence - and soon you will be laughing all the way to the bank.

This blog post is a reprint of an article written by Jay Turo inVistaprint.com’s Small Business Blog.

Jeff Bezos is a great hero and role model for all entrepreneurs that dream of doing something really, really big, and…pulling it off.

Like all legendary business leaders, he also has a number of management and creative peculiarities well worth studying and emulating.

One of my favorites is how Jeff manages the meetings of Amazon’s senior executive team, as described last year when Fortune named him Businessman of the Year:

“…the Amazon CEO's fondness for the written word drives one of his primary, and peculiar, tools for managing his company: Meetings of his "S-team" of senior executives begin with participants quietly absorbing the written word. Specifically, before any discussion begins, members of the team -- including Bezos -- consume six-page printed memos in total silence for as long as 30 minutes”

Bezos goes on to note that “Writing a memo is an even more important skill to master." Full sentences are harder to write," he says. "They have verbs. The paragraphs have topic sentences. There is no way to write a six-page, narratively structured memo and not have clear thinking."

Now when I learn of things like this, I understand why the success of a Jeff Bezos is no accident.

Remember, in addition to founding and leading one of the most successful technology companies of all times, Jeff Bezos also made arguably the greatest investment of all time.

The story is well-known but worth re-telling. In 1998 when Larry Page’s and Sergey Brin’s Google offices were a Menlo Park, California garage, Bezos invested $250,000 of personal funds into the fledgling startup.

When Google went public in 2004 that $250,000 investment translated into 3.3 million shares of Google stock. At Google’s IPO that represented a stock share position worth over $280 million.

While he doesn’t disclose how many of those shares he still holds, at the current price of Google stock they would represent an investment position worth over $2 billion.

So, what is it about what makes Jeff Bezos tick that allows him to have such great success when so, so many others - with similar ambition and arguably even greater talent - fall by the wayside?

I recently read a great book (bought on Amazon, of course) by Mark Helprin called "A Soldier of the Great War."

It is the amazing story of an Italian PhD student in aesthetics who was drafted into the Italian Army in World War I. In addition to being an unbelievable barnburner of a read and a tale of love and heroism and adventure, it is also the story of a young man trained as an "effete" intellectual struggling to come to grips / find wisdom from and peace with the horrors of war.

The story ends with its hero - Alesandro Giuliani - as an old man looking back on his life of books, of art, of family, of adventure, and of war and loss.

In the end it is the intersection of these two - of his great intellectual journeys tempered into character and resolve via the various "mortifications of the flesh" of his life - hard work, self-sacrificing, courageous deeds and words, and the willingness to push himself to the limits of one's endurance.

And from this coupling of intellectualism and ideas with a life of action and a love of the fight does flow the genius, power and magic of a Jeff Bezos.

So at your next meeting, do like Jeff and put down the PowerPoint and pull out the pen!

The word from the Fed last week that it would continue with its quantitative easing - purchasing approximately $85 billion per month in U.S treasury bond and de facto continuing to expand the country’s money supply - signaled that that the era of extremely low interest rates will continue.

Predictably, stock markets worldwide cheered along with it being seen as a very positive signal for the well-recovering US housing market.

Now, as to what it means that the Fed has, since 2008, expanded the U.S. Money Supply almost 400% - from $800 billion in 2008 to over $3.5 trillion today?

Well, it doesn’t take a Nobel Prize in Economics to reliably predict the inevitable outcome…

Inflation.

Now, in spite of its strong negative connotations, an inflationary economy while extremely painful for very many, also offers opportunities to profit and win.

Here are three:

Winner Number One: Debtors. This is obvious, but easy to overlook. Those owing money at set interest rates - homeowners with 30 year fixed mortgages and companies issuing bonds - will benefit enormously as the inflation train rolls in.

Let’s look at a worst but not overly improbable case - a hyperinflation period where all prices rise 10X, resulting in a $500,000 home able to be credibly listed for $5 million.

It sounds crazy, but over the years in countries where hyperinflation has hit, this has not been an uncommon occurrence.

Now let’s say that home was financed (or refinanced) with a $400,000, 30-year mortgage at a fixed rate of 3.5%.

Well, with its price increasing from $500,000 to $5 million - while the amount owed on it remains fixed - all of a sudden the house’s equity to debt ratio skyrockets from 20% to 92%!

Winner Number Two: Companies with Pricing Power. Businesses with the ability to increase prices quickly without seeing sales plummet - think luxury goods and easily adjusted staples like gasoline at the pump - will hold significant advantages over businesses constrained by “stickier” prices.

Examples of the latter include services like mobile phones contracts and gym memberships, and the classic example of restaurants not increasing prices because of the cost of printing new menus.

Winner Number Three: Private Companies for Sale. My favorite, as there is no greater form of an entrepreneurial, economic success than a sale of a business at an attractive price.

In a world of rising prices, the acquisition appetites of larger companies increase as their cost of money - as driven by their valuation multiples - decrease.

This is most evident for public companies, now trading at a rich 18x earnings (S&P 500), who are able to buy smaller, usually private companies with the relatively cheap currency of high multiple public equity.

This frothiness also drives the financing environment, where buyers (investors) and sellers (entrepreneurs, companies seeking capital) more easily strike higher risk, higher valuation deals (see Fab.com, HootSuite, and scores of others) with an ease that isn’t there in a flat or deflationary environment.

So, if you're an entrepreneur, think about accelerating and intensifying both your financing and exit planning efforts.

And for investors, remember that the worst strategy in an era of rising prices is to be standing still and sliding away in fast depreciating cash.

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Individual Retirement Accounts, or IRAs, in all their forms - traditional, Roth, 401k, Defined Contribution, Simple, SEP, 403(b) and 457, have become increasingly popular vehicles for private equity investing.

For the individual investor, investing in private equity via a "Self-directed" IRA has a number of key advantages:

First and foremost are tax savings - both at the time of investment and as the investment appreciates. In some circumstances - for pre-tax contributions via a SEP-IRA for example - up to $49,000 can be invested on a pre-tax (i.e. tax deductible) basis.

Secondly, the power of tax - free compounding of interest, dividends, and capital gains - via both traditional pre-tax IRAs as well as the increasingly popular (and increasingly tax-advantaged) post-tax Roth IRAs is enormous.

In high-return and payout scenarios, where there are larger cash dividends and/or capital gains paid on an annual basis, the value of tax free compounding can lead up to a doubling of total investment return when compared to taxed compounding.

And thirdly, investing in private equity via an IRA addresses "de facto" arguably the key negative of private equity investing - its illiquidity. This is because, to encourage a long-term, retirement-focused time horizon, under the IRA umbrella there are significant, structured penalties for early withdrawl.

In short, IRAs are ideally designed to house long-term investment assets with high capital appreciation potential. This is, of course, the core objective of almost all private equity investing.

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Last week, I talked about the communication breakdowns that occur when investors and entrepreneurs talk about risk.

Well, in most forms of angel and early-stage private equity investing, these breakdowns flow from a misunderstanding of the power and nature of outliers.

The concept of outliers and how they apply to early stage private equity investment was best described by the Lebanese thinker and writer Nicolas Taleb, in his best-selling books "Fooled by Randomness" and "The Black Swan."

In the Black Swan especially, Taleb described the nature and importance of outliers in a modern, inter-connected economy:

“What we call here a Black Swan is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."

Taleb continues, "I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives."

Less famous, but more helpful when it comes to designing an effective private equity investing strategy is Taleb's theorizing on how technological interconnectedness vastly intensifies Black Swan impacts.

This idea of technological interconnectedness is related - though not exactly the same – as that of the much ballyhooed Network Effect that is so much at the heart of many of the biggest technological and investment success stories of the last 15 years, Facebook, Twitter, and LinkedIN, being first and foremost amongst them.

In its simplest form, the Network Effect posits that the value of a network increases exponentially with each new user on it.

Or, in other words, the primary reason why folks use Facebook, Twitter, and LinkedIN is because there are a lot of other folks that use Facebook, Twitter and LinkedIN too.

And, as more users join, such the value for others to join grows that much greater.

And so on and so on.

Thus, one of the first screens that the intelligent early stage investor should utilize is the degree to which a network effect is present in a company's business model.

Now, let’s get to the rub of the matter as to how Taleb’s interconnectedness concept both informs and signals danger for the thoughtful investor.

Simply put, global technological inter-connectedness drives the winning business models to heights never seen before …

…and because of this, there are a lot fewer of them.

Simply put, the winners are bigger and happen faster than ever - Facebook's IPO was bigger and faster than that of Google’s which was bigger and faster than that of Microsoft’s, which was bigger and faster than that of Apple’s.

And because the winners are bigger, there are less of them.

So that giant sucking sound you hear is the consuming of so much of the energy and return in the deal economy into fewer, bigger and more lucrative deals.

To put it another way, turning $500,000 into $1.8 billion in seven years as Peter Thiel did as a small minority investor in Facebook is just not beyond extraordinary - it is also unprecedented.

And, correspondingly, returns of this scale crowd out and widely skew the distribution to fewer, higher returning deals.

Now, how should we respond to this brave new and highly challenging investing and entrepreneurial world?

Well, one obvious response is to proceed extremely carefully.

Investing in early stage private companies can be great fun and you can make money beyond your wildest dreams if the stars are aligned right doing it….

…but the probabilities of doing so in any one company or deal are low…and getting lower.

And unfortunately, this is true no matter how enthusiastic, how passionate, how hardworking, how brilliant the entrepreneur that is pitching his or her deal happens to be.

So does this mean that early stage private equity investing is for the birds? And that we all should just stay away?

Of course not.

You just have to do it right.

Next week, we’ll share how today’s most successful investors and entrepreneurs do just that.

Most entrepreneurs fail to raise
venture capital because they
make a really BIG mistake when
approaching investors. And on
the other hand, the entrepreneurs
who get funding all have one thing
in common. What makes the difference?